Some bullion coins are already currency. They do not circulate because the designated monetary value is way below the market value and so they are hoarded. Imagine what would happen if the government decided to use silver coin for money and implemented a policy such as this.

We would provide The Irish a reason to save by giving them something of Value to save

The following policy to be implemented irrevocably (unless changed by public referendum)

A one ounce silver coin will be issued a monetary value according to its silver content.

The one ounce silver coin .9999 pure contains one troy ounce of silver and will be issued a monetary value guaranteed to be 20% higher than the world spot price at the Friday close each week. While this monetary value will rise according to the world market spot price for a troy ounce of silver it will NEVER fall. This adjustment in the price will be done on the Sat night/Sunday AM time slot.

For example, this is the mechanism for the calculations.

Today Sat 4th Dec 2011 we imagine as the date of implementation.

The Spot price of silver is in Euros E24.27. Plus a markup of 20% or E4.85 = E29.12.

There is one other calculation required. To make a simpler calculation to avoid irritating small adjustments we need a number divisible by 5.

The E29.12 is then rounded up to the nearest multiple of 5 which is E30. All one ounce Silver coins will now circulate for monetary purposes at the designated monetary value regardless of the printed amount on the coin.

Should the spot price of silver rise to a price higher than 80% of the monetary value, such monetary value will be adjusted the following weekend by a multiple of 5 until again the monetary value exceeds the spot by 20%.

Say the spot price rises to 24.50. Plus it by 20% = 29.40. Raise it to the nearest multiple of 5 = 30, so there is no change in the monetary value as suggested in the calculation above.

If the spot price increases to 25.50 we calculate the new monetary value as follows. Plus the spot price by 20% = 30.60. Rounded up to the nearest multiple of 5 = 35.00 as monetary value, for an increase of E5.

If there is a slump in the price of silver and it drops in the spot price to E20.00. Plus by 20% = E24.00. That is a lower price than the high of E35.00 so the monetary value is unchanged and remains at E35.00.

Why do we have this policy of the mark up to at least 20%?

In order for silver bullion coins to remain in circulation and to not be melted down to bullion it is essential that the monetary value be always higher than the bullion melt price or the spot price.

There are costs associated with obtaining silver.

It is possible that governments or government mints can obtain silver at spot price but the price could be higher.

There is a cost to the mint of producing the coin, minting and distribution. Say 10%

Any overage is sovereignty to the government that allows the government to accumulate bullion as a reserve.

As these reserves accumulate it adds strength to the value of all Irish currency and the Irish economy.

FRACTIONAL RESERVE BANKING OF ANY KIND RELATING TO SILVER OR THE NOTES WOULD BE OUTLAWED.

All people in the world would be confident that the monetary value of a silver coin would never drop. Whereas, silver bullion would fluctuate in value depending on the world spot price, as happens at present.

For Irish citizens the preferred method of saving would be in silver coins which could only go up in monetary value and not down.

Banks would be able to store, in vaults, any amount of silver coin on behalf of customers. Such “deposits” would be custody accounts secured by the bank but would not be the property of the bank. (Currently, cash deposits, that pay interest, become the property of the bank and the bank is able to lend that money with no permission from the depositor.) It is foreseen that the bank would/could offer services to the depositor for which they could charge.

An electronic bank account could allow a depositor to use the “Money” in the bankto pay for goods and services by debit card as is currently done. As the trade flows back and forth an accounting is kept and the settlement made in specie according to the records. The depositor could claim back from the vault up to as much coin as his account now says he owns.

Banks could, of course, buy their own coins to be held on their own account, which they could make available for sale to the public.

The silver coin deposited in a bank or owned by the bank cannot be loaned out in any proportion (no fractional reserve banking) and at all times the amount outstanding to the customer is 100% backed by the coin on deposit. If the customer opts to accept fiat bank notes from the bank to replace the silver the customer no longer owns the bullion which it has effectively sold to the bank.

An Post

It is suggested that the Government of Ireland form its own commercial bank to facilitate the distribution of Silver coins in the widest dissemination. It is further suggested that the Irish Postal Service, An Post, be utilized for this purpose. It is already in place in every town and has a courier service component operating.

Irish Mint

At a time when the world spot price of silver drops any appreciable amount it is also the time that the seigniorage to the government is greatly increased and so it is an opportunity for the government to buy bullion to issue in to coin at the much higher monetary value or at a later date at a still higher value. However, at no time can anyone demand the mint buy bullion from them. The mint will be instructed to coin silver money to meet demand but it will be the prerogative of the bank to decide when and where the bullion is obtained and how much is paid. The Irish mint will provide the same guaranty of weight and quality of the coins as at present .There will be no taxes on monetary coin.

It is recognized that a .9999 pure silver coin is not the most durable as its softness causes wear and tear. It is further recognized that sterling coin of 92.5% pure with the balance alloyed with copper provides a much harder more durable coin. It is proposed that at a future time consideration be given to production of sterling silver coins but still containing the full one ounce of silver as has the current one ounce silver coin.

As we expect the silver coin to be used initially as a vehicle of savings it is not expected that the one ounce silver coin will go into immediate circulation to any large degree. At some point the coins will start to be useful for circulation and trade and that would be the time for the Irish Mint to provide sterling silver coins in any amount until the demand is sated.

There is recognition that the Irish mint production will not be able to obtain silver in sufficient amounts in the initial introduction. Therefore it is suggested that any silver one ounce coin issued from a reputable mint with the required guarantee of quality and weight will likewise be monetised. For instance the Canadian One ounce silver Maple Leaf and the US silver eagle could also be monetised as described above.

“Please just accept, even if you don’t follow my analysis, that sound money guarantees a stable yet progressive economy where people are truly equal. It allows people to save properly for their retirement so that they will not become a burden on the state. It leads to democracy voting for small governments. It encourages peaceful trade and discourages war. It is the only path, after this mess, that leads us to long-lasting and peaceful prosperity. We really need everyone to understand this for the sake of our future.”

“In terms of the predictability of price trends, the moderate inflation officially targeted in paper money systems today has no advantages over the moderate secular deflation in a commodity money system. But in all other respects, and in sharp contrast to generally held beliefs today, secular deflation has many advantages. In a commodity money system, the monetary asset is likely to provide a small steady return through the on-trend decline in prices, which allows those without investment expertise (or the means to purchase investment advice) to save through cash holdings. On the other hand, the constant injection of new money in a paper money system has to lead to the distortions of interest rates and to the misallocations of capital that we analyzed earlier and that will progressively unbalance the overall economy.”

From the bill to monetize the MEXICAN Libertad coin as put before the Mexican Congress (2011)

“In order to palliate the financial crisis and the economic recession, central banks and governments have reacted by injecting more liquidity and credit; these actions have intensified the causes that provoked the instability, further weakened the whole system, caused a world crisis of deficits and sovereign debt and further increased penury and scarcity in the majority of the population.

These “rescues” and emergency repairs have succeeded in prolonging for some additional months the life of the financial system, but they will cause its collapse to be much more dramatic and painful. The International Monetary Fund has itself warned that “the risk of a double recession has increased” (IMF Report, June 1, 2010).

For families, the inflationary rise in prices, the evaporation of savings and the loss of purchasing power are causing a distressing situation of tightness and anxiety which are depressing and negative for interpersonal relations, as well as setting up a vicious circle of want and scarcity.

The ultimate origin of the financial and economic problems of today dates to August 1971 when real money – backed by precious metal – was substituted by fictitious money, which can be issued exorbitantly because it consists of nothing other than paper and computer digits.

By HUGO SALINAS PRICE in Dorothy’s Silver Shoes delivered at the London GATA conference, London Eng. Aug 6th 2011 (Adapted from Ireland from a US presentation)

“The restoration of the silver currency of Ireland by the very simple procedure outlined here can provide the life-saving alternative. There is, at present, no practical proposal for a viable action in the field of money. Perhaps there can be no other practical proposal? Perhaps a return to silver money is the only path out of the present crisis of civilization?

Let us hope that a political leader in Ireland understands this message. The popular appeal of silver is universal; “silver shoes” will take that leader far- and the Irish people will follow him on that road!”

My thanks to Hugo Salinas Price, President, Mexican Civic Association Pro Silver, www.plata.com.mx for his patience in reviewing this presentation which has been largely inspired by his writings and those who contribute to LeMetropoleCafe.com

Central Banking

The primary function of a central bank is supposedly to monitor and control a nation’s money supply by either printing money, removing money or raising and lowering interest rates.

The modern central bank prints paper money divorced from an underlying asset, which means that the bank can print as much as it chooses. The first central bank was the Bank of Amsterdam, established in 1609. Almost 100 years later, the Bank of England was created by Scottish businessman William Paterson in the City of London at the request of the English government to help pay for war.

In the US, the Federal Reserve was established in 1913. By 1935, the only significant independent nation without a central bank was Brazil, which today has one. Central banks are thus prevalent around the world, including Asia and China. China has a central bank, though unlike some central banks, the People’s Bank of China is not considered independent of the State but is run by the Chinese Communist Party.

Whatever central banking was once, the idea is basically flawed. Human beings do not know how much money an economy needs. Only the free market can determine that.

Nonetheless, a host of socialist and quasi-socialist economists have glorified the role of central banks and obscured the real reason for their invention. Perhaps the most brilliant of these central bank apologists is John Maynard Keynes, himself a central banker, whose great economic tract, The General Theory of Employment, Interest and Money, advocated the use of both fiscal and monetary stimuli to make economies prosper.

With Keynes’s help, government intervention through taxes and central bank policies became an accepted way of running economies.

In simplest terms, central banks inflate by creating money. The more money they create, the cheaper money becomes, and the less a government’s debt becomes. By cheapening money, the government deprives individual citizens of part of the value of that money. As the value is eroded, the citizen becomes poorer, even if he or she doesn’t notice it right away.

There are three often-mentioned ways for central banks to help stimulate or deflate the economy.

• One way is for the central bank to buy or sell Treasury IOUs.

• Another way, which was more popular in the 18th and 19th centuries, is to raise and lower the rates of the so-called discount window, the amount that the central bank charges to its member banks for short-term borrowing.

• The third way is to move short-term interest rates up or down.

The main manner in which central banks move the economy is by adding to or subtracting from the amount of money in circulation by buying or selling government bonds, as mentioned above.

Even raising short-term rates constitutes a kind of tax because when rates are raised, bonds can lose their value, and citizens holding onto bonds — especially longer bonds — can suddenly find themselves poorer by thousands of dollars as the market reacts to rate news.

While the manipulations of the central banking mechanism sound innocent enough, free-market economists fervently blame almost every economic disaster of the last 500 years, with the exception of Tulipomania, on government intervention in the money supply or the marketplace.

Today, thanks to the Internet, central banks are under attack as never before. Their franchise provides the great central banking families with the funding they need to try to move the world toward global governance. Nothing in the world is what it seems today because of central banking and the monetary distortions that it causes.

The boom-bust cyclicality of modern economies can be laid directly at the feet of central banking, with its monetary stimulation, which first expands an economy and then contracts it when the expansion has gone too far. Thus, central banking is responsible for the manifold disasters that have overtaken the Western world in the past century at least.

Wars, industrial collapse, recessions and depressions can all be laid at the feet of central banking and the great families that insist on its ongoing implementation. In the age of the Internet Reformation, however, more and more people understand how central banking really works and the devastation it causes.

The 21st century may see a real conflict between a power elite that insists on a central banking model for the economy and millions, if not billions, who begin to demand free markets and freer economies.

Read it and weep all you “respectable” investment advisors and “financial journalists”; gold has finished its twelfth up year since the stock market top in January 2000, with silver finishing its tenth up year of the past twelve. To see the actual significance of gold and silver’s performance since December 1999, the table below lists the performance of gold and silver with the Dow Jones Total Market Groups (DJTMG) and some key economic statistics. And remember, for over a year the metals have seen a cyclical correction while the stock market has been “advancing”, as the “policy makers” stand guard against deflating financial assets.

I use Currency-in-Circulation (CinC #41); the number of US Dollars printed and placed into circulation by the US Government as my inflation index. It’s not perfect, but far superior to the US Department of Labor’s Consumer’s Price Index (CPI #63). However, noting that the US National Debt (#22) is up 185.47% in the past twelve years, maybe I should begin using the increasing rate of flow for toxic waste emitted from the US Treasury as my inflation index. No matter, gold and silver sit comfortably at #2&3 in the table, far above the increases in CinC and the National Debt. This is important to all of us; seeing gold and silver appreciating faster than the frauds, wastes, and fiscal abuses of the Federal Government.

Note that every item numerically above Digital Hardware (#72) has seen a negative return in nominal dollar terms since December 1999. However, anything above CinC (#41) up to Digital Hardware may have seen a positive twelve year nominal gain, but has performed below the rate of inflation as measured by CinC. Still, Washington will tax you for your nominal gains (inflationary losses) all the same.

In truth, the financial media for the past thirteen years has had positive and negative things to say about every investment item listed in the table. Well they have. But on the whole, it is fair saying the financial media for over a decade has biased their reporting in support of the winning investments of the 1990s’, with most of them found between #73 & #100 with nominal double-digit percentage losses.

If gold, silver and mining shares have done so well since 1999, why is investment sentiment so poor for what is clearly the best performing asset class of the past decade? Media coverage of precious metals for over a decade has been of two varieties:

Promoting precious metals when metal prices were near cyclical peaks, with the effect of luring uninformed investors to enter a market in danger of a normal short-term bull market correction.

Speaking nothing but ill of the old monetary metals when they were correcting in price, suggesting that the precious metals bull market, the financial media has yet to acknowledge, was finally over.

Just this week on Wednesday morning (Jan 02), Dennis Gartman on CNBC once again warned the public against considering gold as a “safe” investment. Then just hours later, Jim Cramer told his viewers to take a good position in the bank stocks as 2013 is looking up as a good year for the banks. If gold, silver and yes the mining shares too have done wonderfully since December 1999, most people investing in them have not done well due to intentional media disinformation. This is a real shame for aging Americans will discover in a few years that Washington has comingled their Social Security payroll “contributions” with the Federal government’s general-revenue funds.

But one can’t simply look at dry percentages shown in the table above to fully comprehend the impact CNBC “experts” have had on its viewers’ net worth. So I based the table below on the performance of $10,000 invested in December 1999 to December 2012. Ten thousand dollars invested in gold, compared to the returns of the DJTMG’s Banking Index.

Here is how I calculated the results; $10,000 could purchase 34.8068 ounces of gold in December 1999 (today $10K buys only 6.055 ounces), the banking index values are as published in Barron’s.

A return difference of $53,933.30 between the appreciation of $10K of gold since 1999 and the depreciation suffered by investing $10K in bank stocks; that’s huge! You can be sure this will not be commented on by the financial media, but it’s true nonetheless.

But we should recognize that things change; today’s heroes have a way of becoming tomorrow’s zeros. Gold and silver have been in a bull market for over a decade; how long can this last? In the years to come I expect gold and silver, and yes even the greatly despised gold and silver mining shares, will continue rising to price levels that are simply not believable today. Here is why.

We all know that the Doctor Strangelove of perverse monetary science, Doctor Bernanke, will continue “injecting” the supply of US dollars in global circulation until our planet upchucks Obama bucks. And it’s not only the United States that is determined to make its unit of trade worthless; all other central banks are doing the same with their national units of account. Expect future demand for honest money (the old monetary metals), to be tremendous and global in scope.

That alone should be sufficient reason reject Wall Street’s “investment recommendations” and buy as much gold and silver as one can afford. However, there are some interesting developments at the COMEX’s futures paper markets that suggest the smart play is to bias one’s portfolio into silver.

Below we see the weight of gold held at COMEX storage facilities from 1974 to present. COMEX being a gold market needs gold on hand for delivery, should delivery be demanded by the buyers of gold in New York. In fact, most of the contracts traded at the COMEX are settled in dollars so to date this has not been an issue – at least so far.

However, China will become a major gold trading center in the next few years, and they are not intimidated by Washington’s “regulators” or the IRS. Should China’s gold & silver exchange allow metal prices to rise higher than the suppressed prices seen daily on the COMEX, in recognition of gold and silver’s true supply and demand fundamentals, it would become profitable for wholesale purchasers of gold and silver to buy and take delivery of their metal in New York, and fly tons of gold & silver to China for sale at higher prices. This is called arbitrage, and arbitrage is a widely used and a totally legal market mechanism that fixes prices on identical items traded in different markets.

An arbitrage trade for gold and silver, if allowed by Washington, could close the COMEX gold and silver market as the COMEX’s metals will at some point be transferred to China at a profit. But laying too heavy a hand on the free movement of gold flowing out of the COMEX vaults would damage the trust and confidence currently held by COMEX’s large traders. There is nothing stopping these large traders of gold and silver from exporting their operations from New York to Shanghai, except the fear of incurring the wrath of Washington, and China’s current policies of restricting the importation of private gold, and its prohibition of exporting gold. China’s policies on cross border traffic of gold and silver would have to change before it affects the COMEX, but things change all the time.

This is speculation on my part, not a prediction. But what isn’t speculation is that US Government’s economic “policy” is controlled by left-leaning social and political scientists who have contempt for free-market prices. These government bureaucrats neither buy nor sell what they regulate, but they believe they have god like powers to intervene into markets via monetary inflation or regulatory fiat for their ill-advised political purposes.

But as “stupid is what stupid does”, Washington will continue to hide the inflationary consequences of its imprudent quantitative easings by attempting to depress the market price of gold and silver via the COMEX’s paper gold and silver market. Ultimately they will fail, and free-market forces will cause gold and silver prices to rise to their actual free market valuation at the COMEX, or cause the precious metal trade to move to greener pastures than the United States at some time in the unknowable future.

The thing to note about the chart above is how the supply of gold in New York increased during our two bull markets, and then decreased during the bear market. Like bikinis or snow shoes for sale in summer and winter, the market increases inventory for an item in demand, and liquidates items from inventory when demand declines. This is exactly what we are seeing in the chart above, and the demand for gold since 2001 (increase in COMEX gold inventory) is amazing. But note that not all gold held at the COMEX is available for purchase, as the COMEX offers a for-fee service, to store gold for individuals. But I wouldn’t trust them.

This pattern of increasing inventory during a bull market and declining inventory during a bear market has not been the case at all for the silver stored at the COMEX, as seen below.

During the silver bull market of the 1970s, unlike bikinis during a hot summer, and gold above, the supply of silver went down as demand increased. I know the Hunt brothers were purchasing all the silver they could lay their hands on the 1970s, but why did they choose silver and not gold? Because they got it right. Hunt brothers or not, the supply of silver as far back as the 1960s was in shortage to its demand, and deserved to rise in price to balance available supply to demand. President Johnson on signing his legislation for the removal of silver from US coinage said as much.

“Now, all of you know these changes are necessary for a very simple reason-silver is a scarce material. Our uses of silver are growing as our population and our economy grows. * The hard fact is that silver consumption is now more than double new silver production each year. * So, in the face of this worldwide shortage of silver, and our rapidly growing need for coins, the only really prudent course was to reduce our dependence upon silver for making our coins.”

But unsaid in this speech was the US establishment’s determination to prevent the price of silver (“a scarce material” as per Johnson) from rising to its true market clearing price since 1965; five decades ago.

This must also be seen in the context of the US Treasury’s demonetizing gold in August 1971. Having the price of gold and silver rising to unbelievable prices from 1971 to 1980, so soon after Washington demonetized their precious metals stored at the US Treasury was a major embarrassment, as the paper dollar and base metal coins were proving not to be as solid a currency as gold and silver coins, demonetized or not, continued to be.

Considering President Johnsons quote above, it’s unlikely the shortage of available silver during the 1970s bull market was due to suppliers of silver withholding supply from a hot market. This reduction in the inventory of silver was due to the inability of the mining industry to supply sufficient silver to the market as demand increased. Now look at the huge surge in COMEX silver after silver peaked in January 1980. COMEX silver inventories increased 225% from 1980 to 1992, peaking at 283 million ounces in March 1992 as the price of silver collapsed 90% from 1980! What is that all about? The collapse in investment demand returned many tons of silver back to the COMEX – but not for long as industrial demand for silver continued to increase. In the silver market, the US government (for decades) has been successful in severing any connection the price of silver has had to its supply and demand fundamentals.

In 1994, during a huge bear market, COMEX silver inventories began draining, but to where? It couldn’t be to satisfy investment demand as silver’s bear market still had seven years to go. Most likely this cheap silver was a gift from Uncle Sam to industrial users of silver. I say this as the US Government during this time was busy selling their huge inventory of silver from its strategic stockpiles. The San Francisco Mint placed an ad in either the SF Chronicle or Examiner’s help wanted pages (I’ve forgotten which) for moving silver in 1994. If I remember correctly, the SF mint was specific enough in their ad to understand they needed workers to move silver to trucks.

In 2002 the US Government announced their five billion ounce inventory of silver was finally exhausted; dumping much of it during a bear market ensured the worst price possible for the US Treasury. Congress could have instead passed this silver directly to the taxpayers, who it actually belonged to, and force the industrial silver consumers purchase it from us at market prices. Doing so would have been a nice windfall profit for the poor, as well as the middle class, but that isn’t what Washington is all about.

We taxpayers may pay taxes, but corporate political donators also give large sums of money directly, but discreetly, to members of congress and to occupants of the White House. And that made all the difference in Washington’s decision on how best to dump billions-of-ounces of silver into the global silver market from 1965 to 2002.

I remind my readers that the inventories of gold and silver charted in this article are those reported daily by the COMEX, and are not global inventories. But then those are the only inventories the COMEX has to operate with. If demand for actual delivery of metal overwhelms the COMEX’s ability to deliver metal some day in the future, it will default.

The government’s “regulators” may declare a force majeure (an “unforeseeable” act of nature), and allow the big banks to settle their silver contracts in US dollars. But what will the banks’ counter-parties call this? A rip-off they won’t soon forget! This would be especially so should the price of silver explode in the spot market on news of the default. I expect the CFTC will declare silver’s dollar settlement price for the COMEXs defaulted contracts at the last COMEX silver price at the announcement of the force majeure.

Well, we all do what we can to save the big banks when they get into trouble, so don’t feel sorry for the COMEX longs should they get paid $50 to $100 dollars an ounce under the spot price of silver after a default. But I guarantee you that the longs will feel sorry for themselves and become bitter-former traders who will never trade metal, and possibility anything else in the US ever again. So a default in the NY gold or silver markets, both tiny compared to the US stock and bond markets, could signal a pending failure of the entire US financial markets due to lack of interest. I’m not saying that the US debt markets will become a “no bid” market. The Federal Reserve is always there to buy what others refuse.

That sounds really bad, but how likely is something like that to happen? Well, if what I’m hearing from Eric Sprott of Sprott Asset Management, and Bill Haynes of CMI Gold and Silver, current precious metals investment demand is buying over 50 ounces of silver for each one ounce of gold purchased. In other words, when retail or large private investors enter the precious metals market, they prudently use 50% of their money to buy gold, and 50% to buy silver. And that is a real problem for the COMEX, and other precious metals wholesale markets, because for political necessity, Washington’s “Wizards of Smart” have seriously underpriced silver to the extent where 55 ounces of silver currently costs as much as 1 ounce of gold.

Why is that a problem? Because the COMEX only has 13.31 ounces of silver available for each ounce of gold in storage.

In other words, demand for silver is consuming global silver inventory at a rate four times faster than gold demand is consuming gold inventories. This assumes that global inventories of silver and gold are similar to the COMEX, and this may not be true. They may have more, but most likely they have fewer ounces of silver than gold available for sale than the COMEX.

Examine the last two charts; since 2001 the Gold Silver Price Ratio (two charts up) has been over 50 ounces of silver to 1 ounce of gold. Assuming that investment demand for precious metals since 2001 has been for gold and silver in equal dollar amounts for metal purchased, a reasonable assumption, silver inventories will soon become critical.

A supply shock in the silver markets could be mitigated if Washington allowed the price of silver to rise, bringing the Silver to Gold* Price Ratio * (currently at plus 55) decline to the COMEX’s Silver to Gold * Inventory Ratio * of 13.3. The price of silver would have to increase by a factor of four ($121.2), or the price of gold would have to decline by 75% ($412) to make this happen. Due to current central bank demand for gold, a 75% decline in the price of gold is just not in the cards. So, I anticipate someday soon see will see silver trading substantially above three digits.

However, matching the Silver to Gold PRICE ratio, to the COMEX’s Silver to Gold INVENTORY ratio cannot be the ultimate solution to the “policymakers’” problem of rising gold and silver prices. How can it be when the real problem is their “policy” of inflating their national currencies to worthlessness for short-term political gains, as the United States has been doing for many decades!

Look at the chart above. One either understands that rising gold and silver prices are baked into the cake for years to come, or they’re idiots. I don’t mean to offend anyone who disagrees with me, but this chart makes clear that Washington is killing the dollar, and it’s actually sad how few people understand this, and the implication this data’s has for the future price of gold and silver.

Had the US Government maintained their Currency in Circulation at its 1925 level of $3.96 billion paper dollars in circulation, the amount that $3.96 billion of gold reserves held by the US Treasury would allow in an honest gold standard; an ounce of gold today would still be priced at $20.67. If gold today is now over $1650, it’s only because Washington has inflicted the banking system’s management with inflationary-buffoons like Alan Greenspan and Doctor Bernanke.

So, to those of us who understand the market’s malaise for what it really is; central banks doing what their political masters demand of them, we’ll pass on Jim Cramer’s bank stocks, and hold on to our gold and silver no matter what Dennis Gartman would have us do.

William J. Murphy III is the Chairman of the Gold Anti-Trust Action Committee and owner of www.LeMetropoleCafe.com. A graduate of the School of Hotel Administration at Cornell University in 1968, he went to become a starting wide receiver with the Boston Patriots of the American Football League. Mr. Murphy, who now resides in Dallas, Texas, spent much of his business career in the Futures Industry with such firms as Drexel Burnham and Shearson Hayden Stone. Today, he writes gold market commentary for his financial web site that features the precious metals and contrarian economic analysis.

Speech given to the Committee for Monetary Research and Education, Alasdair MacLeod At the Fall Meeting, 20th October 2011.
Before addressing the consequences of today’s macro-economic policies I want to tell you my philosophy. I support sound money for two very good reasons:

1. Firstly, it is a basic human right to choose to save, without our savings being debased by the tax of monetary inflation. Those that are worst affected by this inflation tax are not the rich, they benefit; but the poor and the barely well-off, which is why monetary inflation undermines society and why the right to sound money should be respected. If government gives itself a monopoly over money, it has a duty to protect the property rights vested in it.

2. Secondly, it is a basic right for us to own our own money rather than have it owned by the banks. For them to take our money and expand credit on the back of it debases it. It is an abuse of an individual’s property rights and a banking licence is a government licence to do so. If anyone else was to do this, they would be guilty of fraud. Banks should be custodians of our money, and it should not appear in their balance sheets as their property.

If we had stuck to these sound money principals, several benefits automatically follow, some of which I will briefly summarise for you, and I will have a little more to say about them in a moment:

1. With sound money, governments cannot print money to fund their activities, so the true cost of government becomes apparent to the electorate. The result is that in a democracy the electorate votes for small government because profligate politicians simply do not get elected. Indeed, we need sound money for democracy to work.

2. With sound money, governments are unable to go to war without taxpayers being conscious of the true cost. This is a great incentive for peace and an electorate that accepts the benefits of free markets, and therefore peaceful trade, is less belligerent.

3. With sound money, savings are protected. Prices tend to fall gradually over time, reflecting improved efficiencies in production and of economic progress generally. So the purchasing power of savings increases over the years. For a pensioner, the purchasing power of his savings grows. He can then afford the healthcare he increasingly requires as he ages, and he can afford to leave something for his family when he dies. His savings work with his needs, which is the opposite of the situation in our inflation-ridden economies. In a sound money economy, our pensioners look after themselves and need not be a burden on the state.

4. With sound money, business cycles do not occur. The business cycles we are familiar with are in fact credit-driven cycles, the result of central banks expanding money and overseeing bank credit. They are the result of the misconception that monetary expansion leads to growth. It doesn’t: it merely distorts the economy by favouring a select few at the expense of the many.
These are just some of the benefits of sound money; benefits we can only dream about today. So long as we have unsound money we will have difficulties that will always end in a crisis. Today, we have sunk to the point where the answer to everything is found in more money and bank credit instead of the genuine production of goods and services.
The long-term consequence of monetary inflation is that voters now believe that a government always has the money to provide everything they need. So they naturally vote for more government. They do not question the source of government’s money. They have also been encouraged to believe that the freedom for everyone to do what they want with their own money, only enriches the few, when the opposite is the case. People have become genuinely frightened by the thought of free markets. For this reason, governments regulate most of the private sector. Between government spending and government regulation, the private sector is now dominated by government interference. A minimal amount of capitalism is tolerated in economies that are otherwise socialistic; yet our ills are blamed on the only part of the economy that actually works.

The most effective curb on political ambition is sound money. But we don’t have sound money. So government abuses its monopoly power over the currency to pay for its ambitions. Fiat money gives a free rein to the ambitious politician. The First World War was made possible by German economists, led by George Knapp, the Keynes of his day. He showed the Kaiser the way to finance a war without increasing taxes. In the four years from 1913 the Reichsbank increased paper money in circulation to pay for 85% of Germany’s war expenditure for those years. Of course, after that the script did not go to plan, and as we all know it ended with the total collapse of the currency in 1923.

Collapse the currency, and you collapse savings. Savings today are continually devalued by the expansion of money and credit. Only a fool lends his money for an interest return, and savers are therefore forced to speculate to protect themselves. The result is that there is now a separate destabilising pool of foot-loose capital. It is used by the financial engineers of Wall Street and the City of London to offer higher speculative returns. It has become the feedstock for spendthrift borrowers, particularly governments, who have no intention of ever repaying it.

The damage of unsound money to business has been acute. Business cycles are actually credit cycles, the result of the central banks’ monetary policies. It is easy to understand why the expansion of money and credit drives us into cycles of boom and bust – the exact opposite of what it is meant to achieve.

Take the example of businesses operating with sound money. A business developing a new product or improving an existing one has to invest its own funds, or find a lender with savings. In either case, this takes money away from consumption, money that is reallocated into savings and from there into the proposed investment. And because this money is not spent on consumption, the labour and raw materials required for any new project become available. There is a shift of resources from consumption into savings, from savings into investment, and from there into capital goods. A balance is maintained within the economy and there is no boom and bust. It is a non-cyclical process, driven only by peoples’ economic needs. Business activity is inherently stable.

Now look at the situation when business investment is financed by newly created money and bank credit instead of savings. The process starts with the central bank lowering interest rates. Cheap credit makes investment appear attractive, so the businessman borrows to invest in his business. But many other businessmen are encouraged by the same cheap credit to do the same thing at the same time.
Businesses start investing simultaneously. The randomness has gone. But it gets worse: cheap money also supports consumption, because saving money is less attractive due to lower interest rates.
So our businessman has to bid up for labour, because it hasn’t been released by lower consumption, and he is in competition with the other businesses also taking advantage of cheap credit. He has to pay up for raw materials, for the same reasons. The combination of industry and consumers responding to cheap finance, in the short-term will drive the economy better. But with no extra resources available, prices rise due to bunched demand. And since the quantity of money in the economy has increased, its purchasing-power also falls; exacerbating price inflation even more.
And with prices now rising strongly, interest rates also now rise from artificially low levels. Our businessman’s plans are totally screwed. He got the cost of labour and raw materials completely wrong, and because interest rates have shot up, his Return-On-Investment calculations turn out to be far too optimistic. And to make matters worse, the deteriorating economic conditions that follow, as surely as night follows day, forces him to accept that his sales projections were also too optimistic.
His fellow entrepreneurs are in the same boat. Businesses start cutting back. They act as a crowd on the way up and on the way down.
The essential point is fake money has created a business cycle which didn’t exist before. It is never just a question of central banks getting their timing wrong, as many suppose.
The central bank then compounds the problems it has created by again lowering interest rates with the downturn. More than anything else it is scared of a fall in GDP, so it cannot allow the distortions and false investments of the earlier round of monetary stimulation to unwind properly.
But next time round, the businessman is not so easily tricked. He builds greater margins into his investment calculations. So the economy becomes slower to respond to a new, deeper round of interest rate cuts. The central bank has to act more aggressively to create yet more fake money, to get a result.
These credit expansions work like a ratchet, becoming more destabilising over each credit cycle.

The businessman eventually wises up, overcomes his patriotic instincts and moves his manufacturing to somewhere where at least some of the factors of production are available. He needs to plan for ten, fifteen, twenty years. He cannot afford to ride destructive credit-driven cycles of three or four years. It is cheaper for him to build a factory in the jungle and train up hard-working natives. It is unsound money that has driven him abroad more than any other factor. Over a number of these credit cycles, the economy in countries with falling savings, like the US and UK, becomes more and more dependent on consumption, and less and less on manufacturing.

And eventually, to encourage GDP growth, consumers are encouraged to actually borrow to spend and abandon saving altogether. So on every credit cycle, savings diminish and debt increases, finally accelerating to unsustainable levels of debt. And that is where we arrived in 2008. That marked the end of the road for the post-war Keynesian experiment.

So understanding our economic condition from a sound money perspective gives us a unique viewpoint. It makes it easier to see through the fog of weak money. It also allows us to see through the problems posed by reconciling contrary statistics. And it is here that the establishment deludes itself as well as the rest of us.

The abuse of the GDP statistic is the most important delusion of all, because all economic policy is directed at ensuring it grows. But we must stop and think what it actually represents. GDP is not economic output, it is its money-value, which is a very different thing. It gives us no information about the relative values of the goods and services that constitute the economy.

It is crucial to appreciate this distinction, so by way of explanation let us again assume sound money. This is like an economy operating with gold as money and without credit expansion. To keep it simple, assume that trade is in balance, and there are no net capital flows to or from other countries. Therefore, at the end of the year, there is exactly the same amount of money, or gold, as there was at the start of the year.
What does this mean for GDP? It is exactly the same of course, irrespective of actual economic activity. It doesn’t matter how much people save, because those savings are reapplied into the production of capital goods. The rest goes on consumption. It really doesn’t matter what proportion is private sector and how much is government. But if you start with a million ounces of gold, after a year you still have a million ounces of gold. The only difference is what a million ounces buys. The reconciliation between the start and the end of the year is obviously a combination of prices and how efficiently the available gold is deployed.

In practice, human nature constantly strives for improvement, so over a period of time in a free market the purchasing power of sound money increases. This was borne out by the experience of Britain, which went on the gold standard in 1821 and only went off it before the First World War. During that time, Britain freed up her economy by dropping tariffs and other restrictions on free trade, and we became the most powerful nation on earth. The purchasing power of the gold sovereign increased substantially over those ninety-odd years.

So if we look at how an economy operates in a sound-money environment, we see that the benefits of free-markets flow to consumers, savers and businesses. We can see that any attempt to measure these benefits by changes in GDP are simply absurd. It therefore follows that any change in GDP represents a change in the quantity of money in an economy and not of the level of production.

Now, for some of us this is quite a discovery. We are so used to thinking that GDP is the economy that government policies are now entirely focused on boosting it, mistaking it for the economy itself. It justifies mainstream macro-economic theory, because within that money identity, there is no differentiation between good and bad deployment of economic resources. This, in the minds of most economists, is why badly targeted government spending is no different from the productive private sector’s use of economic resources. It persuades Keynesians and Monetarists that injecting government spending into an economy or expanding the quantity of money in the economy is a valid route to recovery.

Understand this error and you understand why unemployment in the United States is already at depression levels, but according to the GDP statistic you have only just arrived at the brink of a possible economic downturn. Understand this error, and you understand the frantic attempts to get more money and credit into the economy rather than address the real issues. Understand the error of confusing the condition of an economy with its accounting identity and understand the policy mistakes yet to be made.

So we can see that governments are doing just about everything wrong. They have completely failed to understand the productive difference between free markets and government intervention. They have no knowledge of the real cost of diminishing the productive private sector, to pay for the unproductive public sector. The activities of central banks have encouraged boom-bust cycles that have led to the accumulation of debt in both private and public sectors to the point where it has finally become unsustainable. In the process, they have destroyed savings, which are the necessary pre-requisite, the bed-rock for any sustainable recovery.

This is the background to today’s crisis. Governments everywhere are now trying to borrow the largest amounts of money in history, all at the same time. And to those who say that global savings are high, I say those savings are in the hands of the Chinese and Indian workers, who wisely are more likely to buy gold and silver than our government debt.

Governments are now waking up to the fact that real economic growth is disappearing far into the future and taking their hoped-for tax revenues with it. The debt-trap has snapped firmly shut. Some countries, such as the Eurozone members, who cannot print money to finance themselves, are simply the first victims of the imbalance between the financing requirements of governments and the available capital. Others, such as the UK and US, who can print money, do so to defer funding problems and keep their borrowing costs low; but it is only a matter of time before they are found out.

Price inflation will put an end to these artificially low bond yields, if markets don’t first: it has always been this way in the past and now is no different. We already see prices measured in paper currencies rising everywhere. Commodity prices are reflecting the increased quantities of paper money and credit. Prices of essentials, such as food and energy, have been rising sharply. But there are still people who think that the risk is deflation not inflation. Presumably the Fed thinks so, since it has stated that it expects interest rates to stay at close to zero until mid-2013. They will be in for a shock, and here’s why.

They are about to learn the difference between sound money and their fiat money. Real money cannot be issued by central banks. Fiat money is an undated interest-free claim on a government whose central bank merely tells us that it is money. The difference is important, because in a depression, the purchasing power of real money, measured in goods, increases. In the same depression the purchasing power of fake money falls with the financial condition of the issuing government and with its accelerating supply. This is the dynamic behind the rise in the price of gold over the last decade.

The rising inflation I’ve talked about is measured in fiat money. The rise will accelerate because when you are in a debt trap the only way bills get paid is to issue increasing quantities of fiat money and to borrow. And remember, in a depression tax revenues collapse, while social security costs escalate. To defer the “Grecian moment” we have become unhappily familiar with, both the US and the UK will require more fiat money and bank credit than we can imagine.

So what those who worry about a depression haven’t noticed, is that we have been in one for some time. That comes of confusing GDP with real goods and services. Produce enough fake money and GDP looks good. What doesn’t is the level of unemployment. Doubtless George Knapp – remember him? The German predecessor to Keynes? – Knapp would have felt good that German GDP from 1920 to1923 looked fantastic. But then there was the small matter of a collapse in the fiat money of the day, and GDP hadn’t yet been invented anyway.

Today people are stumbling towards an awareness of some of these problems. Most visible to everyone so far is the parlous state of the banks. While it would be foolish to completely discount systemic risk, we should bear in mind two things. Firstly, the central banks are now very aware of this risk, which is different from the time of the Bear Sterns and Lehman collapses. So you can reasonably bet that every scenario that frightens us has been anticipated. The banks themselves are now acutely aware of counterparty risk. Secondly, the evolution of banking over the years has given central banks enormous control over their banking systems. It is wrong to think that you can compare the situation today to that of the banking crisis triggered by the collapse of Kredit Anstalt in 1931. The ECB in Europe only has to stand by with unlimited funds when necessary. Indeed, there has been a run on the Greek banks for at least the last eighteen months without systemic failure. All that is required is for the ECB to make its fiat money available in sufficient quantities.
In a few months we will enter 2012. The immediate stresses of today will probably diminish when enough fiat money has been thrown at them. So to my mind the two biggest headaches for next year will be increasing price inflation, the result of too much paper money chasing too few goods if you like, and rising interest rates. I do not expect the Fed to keep its promise of zero rates into 2013. I do expect them to blame unexpected stagflation.

And finally, we must understand that when it comes to resolving our current difficulties, the order of events is bound to be crisis first, solution second. I wish it could be the other way round, but that is the political reality. What we must do meanwhile is get the message home why the establishment has got its macroeconomics so wrong, and why the only solution is to progress towards sound money.
Today I have only focused on two aspects of the problem: the destabilising effects of credit-driven business cycles, and the misapplication of a statistic, GDP, which should have no importance whatsoever. There is much, much more in this sorry tale. I have touched on the role of savings, without going into how their destruction through monetary inflation is now bankrupting governments. I have not gone into the fallacies surrounding trade imbalances, which are always the result of unsound money. I have not asked how we are to feed our elderly and poor, who have become reliant on government pensions and hand-outs, which governments can increasingly ill-afford.

Please just accept, even if you don’t follow my analysis, that sound money guarantees a stable yet progressive economy where people are truly equal. It allows people to save properly for their retirement so that they will not become a burden on the state. It leads to democracy voting for small governments. It encourages peaceful trade and discourages war. It is the only path, after this mess, that leads us to long-lasting and peaceful prosperity. We really need everyone to understand this for the sake of our future.
Thank you.
The information and opinions expressed in this website are not and should not be construed as investment advice–Tony Brogan

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nov 2011False Prophets Tony Brogan
As we know most economists are very bright people. BUT there are socialistic, Keynesian economists who advocate that the ECB should recapitalize the failing banks and basically do what has been and continues to be done in the US to no good effect.
We now have CNN saying that Ron Paul’s economic policies are madness (Letting the chips fall and those who are bust can go bust, Allowing capitalism to work and reverting to the classical gold standard. )
With influential economists, advocating more QE and the attitude of the controlled media we are doomed to the greatest worldwide depression seen in history.
This is what the elite want and what they are determined to have and will have unless we the great unwashed wake up before it is too late.
With the depression will come social unrest and upheaval? There will be military on the streets (already planned for by the North American mutual aid pact ) and martial law declared.(effectively put in place by Obama 24th Dec 2011) You will not be able to move without papers and ID. You will possibly lose your right to property.
The problem is the unpayable debt; Personal, institutional, and sovereign. Why do we have these debts? Because every single bank note in existence, every credit entry on a computer, every chit invented is a debt to someone. The banking system, starting with the incorporation of the Bank of England in 1694, has issued into existance larger and larger amounts of currency. The US Federal Reserve was modeled after the Bank of England. Since the Bretton Woods agreement in 1944 the US dollar has been the de facto reserve currency and it was supposedly backed by the 20,000 tonnes of gold held in the US. As too much currency was printed (fractional reserve system) the demand to convert to gold depleted the US gold reserves to its alleged amount of 8200 tonnes today.
The problem was twofold. The price of gold was fixed in US dollar terms and the dollar not allowed to float in price against the fixed value of gold. And the US went to a fractional reserve system that allowed many units of currency to be printed against only a single unit of gold. As all other countries fixed their currency values to the US dollar they too were forced to print currency in excess and so was born the monster that is consuming us today.
Nixon reneged on the promise to pay gold in exchange for a note (redeemable became todays note that is irredeemable) in 1971 and since then it has been a free for all of debt issued currency. Can you spell inflation yet? All currencies buy less each year because their value is reduced by every excess extra bill printed or computerized into existence. That is the reason we all spend our money before we receive it. We all borrow today against tomorrow’s earnings; All of us, even those with no personal debt. We allow our governments to run deficit financing. Most western nations have a sovereign debt per capita of around 35,000 per person. That is just what is on the books. When the off budget amounts such as pension payments, social benefits, wars, etc. are added, per capita debt goes to over 100,000 per person. The number of people who can service that debt to pay the interest or pay back the principal is less than a half of the working population. That puts the debt in the range of 400,000 to 500,000 or more per person able to handle extra debt. You can now see that the debt is so large as to be unpayable.
Now ask yourself if borrowing more money will solve the problem and help pay off the debt you already have? Of course it will not. Another credit card puts off the day of reckoning a little further until you are totally cash strapped. Welcome to the US, UK, Ireland, Italy, Portugal, Spain, Belgium and Canada. This list is not exclusive. Soon will be added France and Germany. Each country has bought bonds (debt owed) from these nations. All owe to each other. The whole is as strong as the weakest link. Do you see the contagion. This is just the European banks. When one considers that much debt is owed by Europeans to US banks and vice versa we have a cross Atlantic contagion.

This is why most economists are so dangerous because they suggest there is a solution. It pacifies the locals. The government will look after it all. I’ve got news for you. The government won’t because it can’t. The more it tries the worse it gets. YOU have to take care of yourself.
No matter what, there will be a gigantic economic implosion of debt defaults. The sooner done the better off we will be. The longer it is put off the worse it will get. Paper money backed by nothing is worth nothing. All money reverts to its intrinsic value. In the case of paper a few cents. In the case of a computer entry to your account, it will be a big fat Zero.
Mankind through the ages has bartered and traded. Great fortunes have been made by trading. To facilitate trade a medium of exchange was decided upon. Mostly it was a commodity called gold and more often silver. Why? because they have the attributes wanted by the users. Portability, durability, fungibility (readily recognized and accepted by many people in many places, one unit exchangeable for any other unit), Easily divisible, not easily replicated, and in limited supply (relatively rare or requiring much effort and energy to produce) and finally acting as a store of value because of the way it is a medium of exchange and it is a commodity.
The only time a bank note (currency) is retaining its value over time is if it is redeemable for gold or silver one for one. A good banknote is a receipt from the bank for the exact amount of money you have in storage. Of course you can keep your gold and silver at home and no receipt is necessary. We must go back to a monetary system that uses and recognizes these age old truths. We must return to gold and silver coin as money. It must be recognized by weight alone and of guaranteed quality. There must be no designated numerical value on the coins. Ultimately the monetary value of the coins will be set in the market place. You will buy and sell using so many ounces of gold or silver. This, also, can be done electronically, as in using a debit card.
A principal way to protect yourself from the collapse of the value of paper money is to obtain as many ounces of gold and silver as you can while it is still available and your fiat money has not depreciated to the reduced value where you cannot afford to get any at all. To expunge the world’s debts it is likely the value of gold priced in paper money will be multiples of today’s values. It could be 5, 10, or 100 times. Nobody knows as it depends how fast your central bank prints or produces more fiat currency. It could be 20,000, 50,000 or 100,000 per ounce of gold. And if silver reverts to its historical ratio to gold it could go to 5000 – 10000 per ounce. You will note I did not use a denomination sign in front of the numbers as it applies to all currencies.
Do not listen to false prophets. Protect yourself.
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Proposal to monteize a silver coin One Ounce Maple Leaf) as circulating money

Any individual, corporate body or government agency can form and use their own currency and use it for trade if they wish. Many local communities have created script to use as money and thousands of corporations have printed coupons that can be traded for goods or services.
At this time all national currencies are fiat (mandated) and backed by nothing but the solvency of the state to back their value. Prior to the abandonment of the gold standard in 1971 it was possible to demand gold or silver in exchange for the note. They were inscribed with “Pay bearer on demand” an amount of silver or gold. Today, all that is on the bank note is, “this is legal tender”, and in some cases there is nothing except a denomination to be used for trade. On a UK 5 pound note the inscription says I promise to pay the bearer on demand the sum of 5 pounds. So it is just a promise to give the bearer another 5 pound note. The Euro just has figures for the amount prescribed.
All nations are in competition for trade advantages and one way is to devalue the currency against all the other currencies. But all countries are up to the same trick and so it results in rounds of competitive devaluations with all nations printing more notes to debase their currencies. This results in worldwide inflation which penalizes all savings accounts including pensions, educational funds and any other money pool.
What is needed is a currency that protects the holder from inflation and maintains its purchasing power. It will be a currency that is no one’s liability and cannot be debased.
Historically people through the ages have chosen gold and silver. It is recognized that the current monetary system is in place and it is too disruptive to remove and replace with another overnight unless there is a total collapse and the disruption already evident. It is suggested to place a silver coin currency in parallel with the existing fiat paper currency and let the people decide which they prefer to use.
It is proposed to introduce silver coins denominated by weight only. There will be no stated dollar value on the coin. The basic coin weight will be one troy ounce. (Other coins could be one half ounce, one quarter ounce, one tenth ounce, one 20th ounce and 100th ounce).
The coins will be probably be given assigned names by the users, such as Canada’s Loonies and Toonies coins. Names such as a buck, a half, a quarter, a dime, a bit and a cent are already in the public memory. Or new names can be picked by the public. You can choose a name.
As the world price of silver fluctuates it is crucial that the monetary value of the coins is always higher than the world price of silver bullion or people will horde the coins and have them melted down to bullion and the currency will go out of circulation.
The government will be paid a seigniorage of 10% and a fee to cover the cost of minting the coin say 5% and there should be a buffer of say another 5%. To a total 20%.
Consider the one ounce coin. The government will set a monetary value for the coin of not less than 20% higher than the world spot of the equivalent weight of silver. This monetary value can be increased if the spot price rises but never ever reduced if the spot price falls. All the other coins will be assigned a monetary value pro rata.
E.G. The spot price of silver at the time of writing is $31/ounce.
31 plus 20%=$37.20. For simplicity the monetary value will be raised to the nearest multiple of 5. In this case it is $40. So the monetary value is announced as $40 and this will be on the government web site and published daily in the press. All other coins are valued pro rata.
Later the world spot price drops to $29 but this does not affect the monetary value which remains at $40. Still later the spot price goes to $33 and plus 20%=$39.60 and rounding up to a multiple of 5 still gives $40. Therefore there is still no change to the monetary value. Still later the spot price goes to $35. 35 plus 20%=42 which we round up to the nearest multiple of 5 and the monetary price moves to $45.00
So this silver coin retains its buying power and increases in value with inflation. Now you can sleep at night knowing your savings are not suffering the ravages of inflation.
The country (or issuing authority) accumulates the seigniorage and adds it to the national reserves. At some time Gold coins can be added on a similar basis and the accumulated gold will now begin to back the general currency of the country. At some point the bank notes would again say pay bearer on demand one ounce of silver or gold as the case may be.
It is suggested that at some time all people will be given the right of coinage and on application to the mint will expeditiously exchange bullion for coin. There will be times when it is profitable for the average person to exchange bullion for coin. This will be at a time when the spot price has retreated from a high. Having coin as a savings plan also has the advantage of not dropping in buying power whereas bullion is subject to market vagaries.
It is felt that people will choose silver coin for savings, over fiat bank notes, and that they will be able to be deposited in bank accounts and exchanged for fiat at any time. Perhaps banks will hold sufficient silver coin that the average person will be able to go to a bank to obtain silver coin. It would be to the advantage of the bank to hold silver coin. The function of electronic banking will not be affected. Convenience will not be compromised.
Not only will this be known as Sound Money but when you throw it on the counter the unmistakable tinkle will give the right “Sound”.
The increased demand this will give for silver bullion will put upward pressure on the silver price. The ones who adopt this policy first will see the largest benefit as at some point the rest of the world will follow.
Several states in the US are considering coinage legislation and in Mexico it is before Congress to consider the monetization of the one ounce silver coin the Libertad.
The time is now to implement sound money, silver, for the benefit of all citizens.

————————————————————————————————–From the bill to monetize the MEXICAN Libertad coin as put before the Mexican Congress (2011)

“In order to palliate the financial crisis and the economic recession, central banks and governments have reacted by injecting more liquidity and credit; these actions have intensified the causes that provoked the instability, further weakened the whole system, caused a world crisis of deficits and sovereign debt and further increased penury and scarcity in the majority of the population.
These “rescues” and emergency repairs have succeeded in prolonging for some additional months the life of the financial system, but they will cause its collapse to be much more dramatic and painful. The International Monetary Fund has itself warned that “the risk of a double recession has increased” (IMF Report, June 1, 2010).
For families, the inflationary rise in prices, the evaporation of savings and the loss of purchasing power are causing a distressing situation of tightness and anxiety which are depressing and negative for interpersonal relations, as well as setting up a vicious circle of want and scarcity.
The ultimate origin of the financial and economic problems of today dates to August 1971 when real money – backed by precious metal – was substituted by fictitious money, which can be issued exorbitantly because it consists of nothing other than paper and computer digits.
________________________________________________________________________________________________________________Proposal for the policy for the Government of Canada Utilizing the Treasury, The Royal Canadian Mint, and the Canadian Post Office
The introduction of Sound Money to circulate alongside Canadian Bank Notes
Some bullion coins are already currency. They do not circulate because the designated trade value is way below the market value and so they are hoarded. Imagine what would happen if the government decided to use silver coin for money and implemented a policy such as this.

We would provide Canadians a reason to save by giving them something of Value to save

Silver coins as money will be allowed to circulate alongside Canadian fiat bank notes (they already can, I am just emphasizing this point)
The following policy will be implemented irrevocably (unless changed by public referendum)

The one ounce Maple Leaf silver coin will be issued a monetary value according to its silver content.
The one ounce silver coin .9999 pure contains one troy ounce of silver and will be issued a monetary value guaranteed to be 20% higher than the world spot price at the Friday close each week. While this monetary value will be allowed to rise according to the world market spot price for a troy ounce of silver it will NEVER be allowed to fall. This adjustment in the price will be done on the Sat night/Sunday AM time slot.

For example, this is the mechanism for the calculations.
Today Sat 4th Dec 2011 we imagine as the date of implementation.
The Spot price of silver is in Canadian dollars $33.77. Plus a markup of 20% or $6.75 = $40.52.
There is one other calculation required. To make a simpler calculation to avoid irritating small adjustments we need a number divisible by 5.
The $40.52 is then rounded up to the nearest multiple of 5 which is $45.00. All one pure ounce Maple Leaf coins will now circulate for monetary purposes at the designated monetary value regardless of the printed amount on the coin (currently $5.00).
Should the spot price of silver rise at close of busines on a Friday to a price higher than 80% of the monetary value, such monetary value will be adjusted that weekend by a multiple of 5 until again the monetary value exceeds the spot by 20%.
Say the spot price rises to $36.00. Plus it by 20% = $43.20. Raise it to the nearest multiple of 5 = $45, so there is no change in the monetary value as suggested in the calculation above.
If the spot price increases to 38.75 we calculate the new monetary value as follows. Plus the spot price by 20% = $46.50. Rounded up to the nearest multiple of 5 = $50.00 as monetary value, for an increase of $5.
If there is a slump in the price of silver and it drops in the spot price to $30.00. Plus by 20% = $36.00. That is a lower price than the high of $50.00 so the monetary value is unchanged and remains at $50.00.

Why do we have this policy of the mark up to at least 20%?

In order for silver bullion coins to remain in circulation and to not be melted down to bullion it is essential that the monetary value be always higher than the bullion melt price or the spot price.
There are costs associated with obtaining silver.
It is possible that governments or government mints can obtain silver at spot price but the price could be higher.
There is a cost to the mint of producing the coin, minting and distribution. Say 10%
Any overage is sovereignty to the government that allows the government to accumulate bullion as a reserve.
As these reserves accumulate it adds strength to the value of all Canadian currency and the Canadian economy.
At a suitable time treasury notes or certificates can be issued as representing ounces of silver only with no printed value. They would also circulate with a monetary value similar to the coin. i.e. A Ten ounce note would have a monetary value of $500.00. This note could be backed by silver coins but it MUST remain 100% backed by silver. The issuance of notes would not commence until the public were accustomed to pricing goods in ounces of silver and there was a public demand for the issuance of such notes. The Canadian Government would be cautious in this policy in order not to replace one set of irredeemable notes (current fiat currency notes) with another set of irredeemable notes. It is worth repeating that ANY NOTES ISSUED BY TREASURY MUST BE 100% BACKED BY PHYSICAL SILVER AND THAT FRACTIONAL RESERVE BANKING OF ANY KIND RELATING TO SILVER OR THE NOTES WOULD BE OUTLAWED.
All people in the world would be confident that the monetary value of a silver coin would never drop. Whereas, silver bullion would fluctuate in value depending on the world spot price, as happens at present.

For Canadian citizens the preferred method of saving would be in legal tender coins which could only go up in monetary value and not down.

Mining companies doing business in Canada and or mining silver in Canada would happily sell their silver to the Canadian Mint at world spot prices, which is what they would get elsewhere, and take back silver legal tender coin in payment.

To the argument, “What on earth would a miner do with 1 million ounces of silver coins?” The answer is: “The miner would deposit them in his bank for the monetary value of $50,000,000 Canadian Dollars. He could then write checks on his balance. The Bank would be able to pay out silver ounces @ $50 each, to depositors withdrawing funds. There will be enormous demand for these coins, which cannot fall in Canadian dollar value, but only appreciate.

The miners would be saving and holding cash in silver which could not fall in monetary value which effectively hedges their savings.
The country pays the mine in the same commodity it just bought less a seigniorage charge. This will cost the government nothing and so can be done immediately in any volume desired. The country accumulates silver seigniorage to its reserves. The miners are now able to pay their staff, if the staff desire, with Canadian currency of legal tender coin.

The Mint, on implementation of these policies immediately ceases production of one ounce Silver Maple Leaf coins with a numerical value stamped thereon. Instead only the guaranteed weight and fineness would be stated.

Banks would be able to store, in vaults, any amount of silver Maple Leaf coin on behalf of customers. Such “deposits” would be custody accounts secured by the bank but would not be the property of the bank. (Currently, cash deposits, that pay interest, become the property of the bank and the bank is able to lend that money with no permission from the depositor.) It is foreseen that the bank would/could offer services to the depositor for which they could charge.

An electronic bank account could allow a depositor to use the “Money” in the bank to pay for goods and services by card as is currently done. As the trade flows back and forth an accounting is kept and the settlement made in specie according to the records. The depositor could claim back from the vault up to as much coin as his account now says he owns.

Banks could, of course, buy their own coins to be held on their own account, which they could make available for sale to the public.

The silver coin deposited in a bank or owned by the bank cannot be loaned out in any proportion (no fractional reserve banking) and at all times the amount outstanding to the customer is 100% backed by the coin on deposit. If the customer opts to accept fiat bank notes from the bank to replace the silver the customer no longer owns the bullion which it has effectively sold to the bank.

Canada Post
It is suggested that the Government of Canada form its own commercial bank to facilitate the distribution of Maple Leaf coins in the widest dissemination. It is further suggested that the Canadian Postal Service, Canada Post, be utilized for this purpose. It is already in place in every town and has a courier service component operating.

Royal Canadian Mint
At a time when the world spot price of silver drops any appreciable amount it is also the time that the seigniorage to the government is greatly increased and so it is an opportunity for the government to buy bullion to issue in to coin at the much higher monetary value or at a later date at a still higher value. However, at no time can anyone demand the mint buy bullion from them. The mint will be instructed to coin silver money to meet demand but it will be the prerogative of the National Bank to decide when and where the bullion is obtained and how much is paid. The Royal Canadian mint will provide the same guaranty of weight and quality of the coins as at present .There will be no taxes on monetary coin.

It is recognized that a .9999 pure silver coin is not the most durable as its softness causes wear and tear. It is further recognized that sterling coin of 92.5% pure with the balance alloyed with copper provides a much harder more durable coin. It is proposed that at a future time consideration be given to production of sterling silver coins but still containing the full one ounce of silver as has the Maple Leaf. It is proposed to monetize the one ounce Maple Leaf as it is already widely distributed and recognized, for guaranteed purity and weight, worldwide.

As we expect the silver coin to be used initially as a vehicle of savings it is not expected that the one ounce silver coin will go into immediate circulation to any large degree. At some point the coins will start to be useful for circulation and trade and that would be the time to provide sterling coins as demanded by the people.

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Quoted from Alasdair MacLeod — http://financeandeconomics.org Speech given to the Committee for Monetary Research and Education At the Fall Meeting, 20th October 2011.
“Please just accept, even if you don’t follow my analysis, that sound money guarantees a stable yet progressive economy where people are truly equal. It allows people to save properly for their retirement so that they will not become a burden on the state. It leads to democracy voting for small governments. It encourages peaceful trade and discourages war. It is the only path, after this mess, that leads us to long-lasting and peaceful prosperity. We really need everyone to understand this for the sake of our future.”

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Quote from Detlev Schlitchter in Paper Money Collapse, bottom p157-top p.158
“In terms of the predictability of price trends, the moderate inflation officially targeted in paper money systems today has no advantages over the moderate secular deflation in a commodity money system. But in all other respects, and in sharp contrast to generally held beliefs today, secular deflation has many advantages. In a commodity money system, the monetary asset is likely to provide a small steady return through the on-trend decline in prices, which allows those without investment expertise (or the means to purchase investment advice) to save through cash holdings. On the other hand, the constant injection of new money in a paper money system has to lead to the distortions of interest rates and to the misallocations of capital that we analyzed earlier and that will progressively unbalance the overall economy.”

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From the bill to monetize the MEXICAN Libertad coin as put before the Mexican Congress (2011)
“In order to palliate the financial crisis and the economic recession, central banks and governments have reacted by injecting more liquidity and credit; these actions have intensified the causes that provoked the instability, further weakened the whole system, caused a world crisis of deficits and sovereign debt and further increased penury and scarcity in the majority of the population.
These “rescues” and emergency repairs have succeeded in prolonging for some additional months the life of the financial system, but they will cause its collapse to be much more dramatic and painful. The International Monetary Fund has itself warned that “the risk of a double recession has increased” (IMF Report, June 1, 2010).
For families, the inflationary rise in prices, the evaporation of savings and the loss of purchasing power are causing a distressing situation of tightness and anxiety which are depressing and negative for interpersonal relations, as well as setting up a vicious circle of want and scarcity.
The ultimate origin of the financial and economic problems of today dates to August 1971 when real money – backed by precious metal – was substituted by fictitious money, which can be issued exorbitantly because it consists of nothing other than paper and computer digits.

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By HUGO SALINAS PRICE in Dorothy’s Silver Shoes delivered at the London GATA conference, London Eng. Aug 6th 2011
“The restoration of the silver currency of the United States of America (Canada) by the very simple procedure outlined here can provide the life-saving alternative. There is, at present, no practical proposal for a viable action in the field of money. Perhaps there can be no other practical proposal? Perhaps a return to silver money is the only path out of the present crisis of civilization?

Let us hope that a political leader in the United States (Canada) understands this message. The popular appeal of silver is universal; “silver shoes” will take that leader far- and the American (Canadian) people will follow him on that road!”

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Just substitute the US references and replace the country of your choice. (inserted)

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My thanks to Hugo Salinas Price, President, Mexican Civic Association Pro Silver, www.plata.com.mx for his patience in reviewing this presentation which has been largely inspired by his writings and those who contribute to www.LeMetroleCafe.com